What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-03-10 compared with 2022-09-02 · 263 added, 218 removed, 522 unchanged (48% of the section changed)

28 unchanged sentences

Noncurrent operating lease liabilities 39,725 49,286

Deferred pension and postretirement benefits 4,498 4,737

Deferred pension benefits — 3,917

Deferred income taxes 23,249 22,277

18 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended Nine Months Ended

July 31, July 31,

2022 2021 2022 2021

Three Months Ended

(In thousands, except per share amounts)

3 unchanged sentences

Selling, general and administrative 36,744 30,823

Restructuring charges — — — 39

Depreciation and amortization 10,620 10,257

15 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended Nine Months Ended

July 31, July 31,

2022 2021 2022 2021

Three Months Ended

(In thousands)

Net income $ 1,909 $ 11,239

Other comprehensive (loss)income:

Foreign currency translation (loss) gain ( 5,168 ) 424 ( 19,595 ) 10,056

Other comprehensive (loss) income ( 5,168 ) 424 ( 19,595 ) 10,056

Other comprehensive income (loss):

Foreign currency translation gain (loss) 11,372 ( 3,159 )

Other comprehensive income (loss) 11,372 ( 3,159 )

Comprehensive income $ 13,281 $ 8,080

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

Three Months Ended

(In thousands)

1 unchanged sentence

Net income $ 1,909 $ 11,239

Adjustments to reconcile net income to cash provided by operating activities:

Adjustments to reconcile net income to cash provided by (used in) operating activities:

Depreciation and amortization 10,620 10,257

3 unchanged sentences

Changes in assets and liabilities:

Increase in accounts receivable ( 5,306 ) ( 8,277 )

Increase in inventory ( 48,280 ) ( 32,113 )

Decrease in accounts receivable 20,502 8,340

Decrease (increase) in inventory 645 ( 25,318 )

Increase in other current assets ( 1,431 ) ( 3,534 )

Increase in accounts payable 2,765 1,600

(Decrease) increase in accrued liabilities ( 4,721 ) 12,521

Increase (decrease) in income taxes payable 7,522 ( 5,158 )

Decrease in deferred pension and postretirement benefits ( 239 ) ( 158 )

Decrease in accounts payable ( 21,379 ) ( 8,391 )

Decrease in accrued liabilities ( 12,686 ) ( 18,248 )

Increase in income taxes payable 536 1,391

Increase (decrease) in deferred pension benefits 7 ( 80 )

Increase in other long-term liabilities 1,461 404

Other, net 584 ( 335 )

Cash provided by operating activities 49,854 47,435

Cash provided by (used for) operating activities 3,135 ( 21,651 )

Investing activities:

Business acquisition ( 92,000 ) —

Capital expenditures ( 7,582 ) ( 7,370 )

4 unchanged sentences

Repayments of credit facility borrowings ( 15,000 ) ( 3,000 )

Debt issuance costs ( 1,210 ) —

Repayments of other long-term debt ( 579 ) ( 228 )

2 unchanged sentences

Payroll tax paid to settle shares forfeited upon vesting of stock ( 545 ) ( 1,383 )

Purchase of treasury stock ( 6,600 ) ( 5,741 )

Cash used for financing activities ( 17,937 ) ( 43,480 )

Cash provided by financing activities 83,314 20,857

Effect of exchange rate changes on cash and cash equivalents 997 ( 188 )

Increase (decrease) in cash and cash equivalents 9,969 ( 7,958 )

Decrease in cash and cash equivalents ( 12,038 ) ( 8,342 )

Cash and cash equivalents at beginning of period 55,093 40,061

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Nine Months Ended July 31, 2022 Common

Three Months Ended January 31, 2023 Common

Stock Additional

16 unchanged sentences

Balance at January 31, 2023 $ 372 $ 249,730 $ 336,704 $ ( 38,050 ) $ ( 73,068 ) $ 475,688

Net income — — 26,522 — — 26,522

Foreign currency translation adjustment — — — ( 11,268 ) — ( 11,268 )

Common dividends ($ 0.08 per share)

— — ( 2,671 ) — — ( 2,671 )

Purchase of treasury stock — — — — ( 1,569 ) ( 1,569 )

Stock-based compensation activity:

Expense related to stock-based compensation — 572 — — — 572

Stock options exercised — 9 — — 109 118

Other — ( 29 ) — — — ( 29 )

Balance at April 30, 2022 $ 373 $ 250,756 $ 292,221 $ ( 36,197 ) $ ( 70,979 ) $ 436,174

Net income — — 25,908 — — 25,908

Foreign currency translation adjustment — — — ( 5,168 ) — ( 5,168 )

Common dividends ($ 0.08 per share)

— — ( 2,658 ) — — ( 2,658 )

Purchase of treasury stock — — — — ( 5,031 ) ( 5,031 )

Stock-based compensation activity:

Expense related to stock-based compensation — 583 — — — 583

Stock options exercised — 20 — — 309 329

Balance at July 31, 2022 $ 373 $ 251,359 $ 315,471 $ ( 41,365 ) $ ( 75,701 ) $ 450,137

Nine Months Ended July 31, 2021 Common

Three Months Ended January 31, 2022 Common

Stock Additional

9 unchanged sentences

— — ( 2,587 ) — — ( 2,587 )

Treasury shares purchased, at cost — — — — ( 1,927 ) ( 1,927 )

Stock-based compensation activity:

5 unchanged sentences

Balance at January 31, 2022 $ 373 $ 250,204 $ 268,370 $ ( 24,929 ) $ ( 69,519 ) $ 424,499

Net income — — 14,551 — — 14,551

Foreign currency translation adjustment — — — 1,032 — 1,032

Common dividends ($ 0.08 per share)

— — ( 2,693 ) — — ( 2,693 )

Purchase of treasury stock — — — — ( 2,041 ) ( 2,041 )

Stock-based compensation activity:

Expense related to stock-based compensation — 447 — — — 447

Stock options exercised — 423 — — 5,670 6,093

Balance at April 30, 2021 $ 373 $ 253,147 $ 230,590 $ ( 23,392 ) $ ( 65,621 ) $ 395,097

Net income — — 13,679 — — 13,679

Foreign currency translation adjustment — — — 424 — 424

Common dividends ($ 0.08 per share)

— — ( 2,687 ) — — ( 2,687 )

Purchase of treasury stock — — — — ( 1,773 ) ( 1,773 )

Stock-based compensation activity:

Expense related to stock-based compensation — 500 — — — 500

Stock options exercised — 15 — — 134 149

Balance at July 31, 2021 $ 373 $ 253,662 $ 241,582 $ ( 22,968 ) $ ( 67,260 ) $ 405,389

The accompanying notes are an integral part of the financial statements.

2 unchanged sentences

Nature of Operations and Basis of Presentation

Quanex Building Products Corporation is a component supplier to original equipment manufacturers (OEMs) in the building products industry.

Quanex Building Products Corporation is a global, publicly traded manufacturing company primarily serving original equipment manufacturers (OEMs) in the fenestration, cabinetry, solar, refrigeration and outdoor products markets.

These components can be categorized as window and door (fenestration) components and kitchen and bath cabinet components.

2 unchanged sentences

We also manufacture cabinet doors and other components for OEMs in the kitchen and bathroom cabinet industry.

In addition, we provide certain other non-fenestration components and products, which include solar panel sealants, trim moldings, vinyl decking, vinyl fencing, water retention barriers, and conservatory roof components.

In addition, we provide certain other non-fenestration components and products, which include solar panel sealants, trim moldings, vinyl decking, vinyl fencing, customized compounds, water retention barriers, and conservatory roof components.

We have organized our business into three reportable business segments.

4 unchanged sentences

Unless the context indicates otherwise, references to “Quanex”, the “Company”, “we”, “us” and “our” refer to the consolidated business operations of Quanex Building Products Corporation and its subsidiaries.

Basis of Presentation and Principles of Consolidation

The accompanying interim unaudited condensed consolidated financial statements include the accounts of Quanex Building Products Corporation.

7 unchanged sentences

The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year or for any future periods.

Use of Estimates

In preparing financial statements, we make informed judgments and estimates that affect the reported amounts of assets and liabilities as of the date of the financial statements and affect the reported amounts of revenues and expenses during the reporting period.

9 unchanged sentences

Our performance obligations include product sales, with each product included in a customer contract being recognized as a separate performance obligation.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

For contracts with multiple performance obligations, the standalone selling price of each product is generally readily observable.

1 unchanged sentence

We estimate a provision for sales returns and warranty allowances to account for product returns related to general returns and product nonconformance.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

We generally expense incremental costs of obtaining a contract when incurred because the amortization period would be less than one year.

16 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes our product sales for the three and nine months ended July 31, 2022 and 2021 into groupings by segment which we believe depicts how the nature, amount, timing and uncertainty of our revenues and cash flows are affected by economic factors.

The following table summarizes our product sales for the three months ended January 31, 2023 and 2022 into groupings by segment which we believe depicts how the nature, amount, timing and uncertainty of our revenues and cash flows are affected by economic factors.

For further details regarding our results by segment, refer to Note 11, “Segment Information”.

Three Months Ended Nine Months Ended

July 31, July 31,

2022 2021 2022 2021

Three Months Ended

(In thousands)

26 unchanged sentences

Actual write-offs are charged against the allowance when collection efforts have been unsuccessful.

Property, Plant and Equipment and Intangible Assets with Defined Lives

During the three months ended July 31, 2022, our North American vinyl extrusion operations in our NA Fenestration segment experienced lower-than-expected operating results due to the continued impact of inflation and historical customer contracts which prevent us from passing on the full impact of higher costs to our customers.

We determined that this condition was an indicator of a triggering event which necessitated an evaluation of certain long-term assets used in this business for potential impairment.

We compared the projected undiscounted cash flows we expected to realize associated with these assets over the remaining useful lives of the primary operating assets to the net book value of the long-term assets and determined that these assets were not impaired.

Therefore, we did not record an impairment charge related to property, plant and equipment or intangible assets with defined lives during the nine months ended July 31, 2022, however, should we be unable to successfully increase prices to offset inflation, it is possible that we could incur an impairment in the future.

There were no indicators of triggering events noted for any period in the year ended October 31, 2021.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Related Parties

N et sales for the nine months ended July 31, 2022 included approximately $ 1.6 million of transactions with a customer which is a related party with one of our non-employee directors.

We performed a review of these transactions, of which no single transaction or series of related transactions exceeded $ 120,000 in amount, and determined that these transactions were enacted independently of each other in fair transactions.

N et sales include transactions with a customer which is a related party with one of our non-employee directors for the three months ended January 31, 2023 of approxim ately $ 0.2 million and $ 0.4 million for the comparable prior year period .

We are not aware of any other related party transactions with any of our current non-employee directors or officers outside of their normal business functions or expected contractual duties.

Inventories consisted of the following at July 31, 2022 and October 31, 2021 (in thousands):

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

On November 1, 2022, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with LMI Custom Mixing, LLC (“LMI”) and the equity owners of LMI, Lauren International, Ltd.

and Meteor-US-Beteiligungs GMBH.

Under the Purchase Agreement, we acquired substantially all of the operating assets comprising LMI’s polymer mixing and rubber compound production business (collectively, the “Purchased Assets”) and also agreed to assume certain liabilities relating to the Purchased Assets (collectively, the “Acquisition”).

As consideration for the Purchased Assets, we agreed to pay LMI $ 92 million in cash, with $ 7.1 million of this amount funded into escrow as security for the seller parties’ indemnification obligations.

To fund the amounts paid in connection with the Acquisition, we used a combination of cash on hand and funds borrowed under our Credit Facility.

Subsequent to the acquisition, we had approximately $ 215 million available for use under the Credit Facility.

For the period from the date of the Acquisition, through January 31, 2023, our consolidated operating results included net sales o f $ 16.5 million and operating income of $ 2.0 million, res pectively, associated with LMI.

In connection with the Acquisition, we amended our existing finance lease with Lauren Real Estate Holding LLC for the purpose of adding an additional lease renewal option and increasing rental space by approximately 60,000 square feet of rental space which was added to the 313,595 square feet of rentable area located in Cambridge, Ohio.

As of January 31, 2023, we are still determining the purchase price allocation for LMI .

A preliminary purchase price allocation of the fair value of the assets acquired and liabilities assumed is included in the table below.

These estimates are subject to change and will likely result in an increase or decrease in goodwill, particularly with regard to third-party valuations and our estimates of fixed assets, intangible assets, and inventory, during the measurement period, which may extend up to one year from the acquisition date.

As of Date of

Opening Balance Sheet

(In thousands)

Net assets acquired:

Accounts receivable $ 7,012

Inventories, net 5,684

Other assets 790

Property, plant and equipment, net 35,887

Goodwill 42,091

Intangible assets, net 19,500

Accounts payable ( 4,736 )

Accrued liabilities ( 507 )

Long-term debt (finance leases) ( 13,721 )

Net assets acquired $ 92,000

Consideration:

Cash, net of cash and cash equivalents acquired $ 92,000

We used recognized valuation techniques to determine the preliminary fair value of the assets and liabilities, including the excess earnings method for customer relationships and relief from royalty method for trade names and other technology with a discount rate that reflects the risk of the expected future cash flows.

The goodwill balance is deductible for tax purposes.

LMI is allocated entirely to our North American Fenestration reportable operating segment.

Pro Forma Results

We calculated the pro forma impact of the LMI acquisitions and the associated debt financing on our operating results for the three months ended January 31, 2022.

The following pro forma results give effect to these acquisitions, assuming the transactions occurred on November 1, 2021.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Pro Forma Results

For the Three Months Ended

January 31, 2022

(In thousands, except per share amounts)

Net sales $ 282,358

Net income $ 12,719

Basic earnings per share $ 0.38

Diluted earnings per share $ 0.38

We derived the pro forma results for the LMI acquisition based on historical financial information obtained from the sellers and certain management assumptions.

Our pro forma adjustm ents relate to the elimination of our intercompany sales to our North American Fenestration reportable segment and related cost of sales, incremental depreciation and amortization expense associated with property, plant and equipment and intangible assets to effect the transactions, assu ming a November 1, 2021 effective date.

In addition, we calculated the tax impact of these adjustments at a 25 % effective tax rate.

Inventories consisted of the following at January 31, 2023 and October 31, 2022 (in thousands):

2023 October 31,

6 unchanged sentences

Fixed costs related to excess manufacturing capacity, if any, have been expensed in the period they were incurred and, therefore, are not capitalized into inventory.

We recognize a right-of-use (ROU) asset and lease liability for each operating and finance lease with a contractual term greater than 12 months at the time of lease inception.

We include ROU assets and lease liabilities for leases that exist within other contracts.

Leases with an original term of 12 months or less are not recognized on the balance sheet, and the rent expense related to those short-term leases is recognized over the lease term.

We do not account for lease and non-lease (e.g.

common area maintenance) components of contracts separately for any underlying asset class.

We lease certain manufacturing plants, warehouses, office space, vehicles and equipment under finance and operating leases.

Lease commencement occurs on the date we take possession or control of the property or equipment.

Original terms for our real estate-related leases are generally between five and twenty years .

Original terms for equipment-related leases, primarily manufacturing equipment and vehicles, are generally between one and ten years .

Some of our leases also include rental escalation clauses.

Renewal options are included in the determination of lease payments when management determines the options are reasonably certain of exercise, considering financial performance, strategic importance and/or invested capital.

If readily determinable, the rate implicit in the lease is used to discount lease payments to present value;

however, substantially all of our leases do not provide a readily determinable implicit rate.

When the implicit rate is not determinable, our estimated incremental borrowing rate is utilized, determined on a collateralized basis, to discount lease payments based on information available at lease commencement.

Total lease costs recorded include fixed operating lease costs and variable lease costs.

Most of our real estate leases require we pay certain expenses, such as common area maintenance costs, of which the fixed portion is included in operating lease costs.

We recognize operating lease costs on a straight-line basis over the lease term.

In addition to the above costs, variable lease costs are recognized when probable and are not included in determining the present value of our lease liability.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The ROU asset is measured at the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date and initial direct costs.

For operating leases, ROU assets are reduced over the lease term by the recognized straight-line lease expense less the amount of accretion of the lease liability determined using the effective interest method.

For finance leases, ROU assets are amortized on a straight-line basis over the shorter of the useful life of the leased asset or the lease term.

Interest expense on each finance lease liability is recognized utilizing the effective interest method.

ROU assets are tested for impairment in the same manner as long-lived assets.

Additionally, we monitor for events or changes in circumstances that may require a reassessment of one of our leases and determine if a remeasurement is required.

The table below presents the lease-related assets and liabilities recorded on the balance sheet at January 31, 2023 and October 31, 2022 (in thousands):

Leases Classification January 31,

2023 October 31,

Operating lease assets Operating lease right-of-use assets $ 45,996 $ 56,000

Finance lease assets Property, plant and equipment (less accumulated depreciation of $ 4,706 and $ 3,726 )

57,223 22,003

Total lease assets $ 103,219 $ 78,003

Operating Current operating lease liabilities $ 7,213 $ 7,727

Finance Current maturities of long-term debt 2,286 1,336

Operating Noncurrent operating lease liabilities 39,725 49,286

Finance Long-term debt 52,797 17,816

Total lease liabilities $ 102,021 $ 76,165

The table below presents the components of lease costs for the three months ended January 31, 2023 and 2022 was as follows (in thousands):

Three Months Ended

Operating lease cost

$ 2,163 $ 2,536

Finance lease cost

Amortization of leased assets 799 298

Interest on lease liabilities 600 132

Variable lease costs

Total lease cost $ 3,885 $ 3,189

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The table below presents supplemental cash flow information related to leases for the three months ended January 31, 2023 and 2022 was as follows (in thousands):

Three Months Ended

Cash paid for amounts included in the measurement of lease liabilities:

Finance leases - financing cash flows $ 558 $ 279

Finance leases - operating cash flows $ 600 $ 132

Operating leases - operating cash flows $ 2,226 $ 2,536

Right-of-use assets obtained in exchange for lease liabilities:

Operating leases $ 1,180 $ 417

Finance leases $ 24,497 $ 54

The table below presents the weighted average remaining lease terms and weighted average discount rates for the Company's leases as of January 31, 2023 and October 31, 2022:

January 31, 2023 October 31,

Weighted average remaining lease term (in years)

Operating leases 11.0 10.8

Financing leases 19.7 13.7

Weighted average discount rate

Operating leases 3.86 % 3.84 %

Financing leases 4.47 % 3.78 %

The table below presents the maturity of the lease liabilities as of January 31, 2023 (in thousands):

Operating Leases Finance Leases

2023 (remaining nine months) $ 6,663 $ 3,505

2024 8,109 4,632

2025 6,378 4,570

2026 5,087 4,453

2027 4,377 4,333

Thereafter 28,849 62,183

Total lease payments 59,463 83,676

present value discount 12,525 28,593

Total lease liabilities $ 46,938 $ 55,083

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Goodwill and Intangible Assets

The change in the carrying amount of goodwill for the nine months ended July 31, 2022 was as follows (in thousands):

Nine Months Ended

July 31, 2022

The change in the carrying amount of goodwill for the three months ended January 31, 2023 was as follows (in thousands):

Three Months Ended

January 31, 2023

Beginning balance as of November 1, 2022 $ 137,855

LMI acquisition 42,091

Foreign currency translation adjustment 4,760

1 unchanged sentence

At our last annual test date, August 31, 2022, we evaluated the recoverability of goodwill at each of our five reporting units with goodwill balances and determined that our goodwill was no t impaired.

We evaluated for indicators of impairment during the three and nine months ended July 31, 2022 and determined that there were no triggering events.

For a summary of the change in the carrying amount of goodwill by segment, see Note 11, “Segment Information.”

An additional reporting unit was acquired during the three months ended January 31, 2023.

We evaluated for indicators of impairment for all reporting units during the three months ended January 31, 2023 and determined that there were no triggering events.

For additional discussion of change in reporting units and a summary of the change in the carrying amount of goodwill by segment, see Note 12, “Segment Information.”

Identifiable Intangible Assets

Amortizable intangible assets consisted of the following as of July 31, 2022 and October 31, 2021 (in thousands):

July 31, 2022 October 31, 2021

Amortizable intangible assets consisted of the following as of January 31, 2023 and October 31, 2022 (in thousands):

January 31, 2023 October 31, 2022

Gross Carrying

6 unchanged sentences

Total $ 238,933 $ 155,532 $ 216,386 $ 151,351

We had aggregate amortization expense related to intangible assets for the three and nine months ended July 31, 2022 of $ 3.0 million and $ 9.0 million, respectively, and $ 3.0 million and $ 9.7 million for the comparable prior year periods.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Estimated remaining amortization expense, based on current intangible balances, for each of the fiscal years ending October 31, is as follows (in thousands):

In connection to the LMI Acquisition, we added gross carrying intangibles of $ 16.0 million of customer relationships, $ 3.0 million of other technology and $ 0.5 million of trade names.

We had aggregate amortization expense related to intangible assets for the three months ended January 31, 2023 of $ 3.1 million and $ 3.0 million for the comparable prior year period.

Estimated remaining amortization expense, assuming current intangible balances and no new acquisitions, for future fiscal years as of January 31, 2023 (in thousands):

Amortization Expense

2022 (remaining three months) $ 2,949

2023 (remaining nine months) $ 8,937

Thereafter 33,038

Total $ 83,401

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Debt and Finance Lease Obligations

Long-term debt consisted of the following at July 31, 2022 and October 31, 2021 (in thousands):

Long-term debt consisted of the following at January 31, 2023 and October 31, 2022 (in thousands):

2023 October 31,

20 unchanged sentences

In the event of default, outstanding borrowings would accrue interest at the Default Rate, as defined, whereby the obligations will bear interest at a per annum rate equal to 2 % above the total per annum rate otherwise applicable.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Credit Facility provides for incremental revolving credit commitments for a minimum principal amount of $ 10.0 million, up to an aggregate amount of $ 150.0 million or 100% of Consolidated EBITDA, subject to the lender's discretion to elect or decline the incremental increase.

5 unchanged sentences

Substantially all of our domestic assets, with the exception of real property, are used as collateral for the Credit Agreement.

As of July 31, 2022, we ha d $ 38.0 million of borrowings outstanding under the Credit Facility (reduced by unamortized debt issuance costs of $1.6 million), $ 5.1 million of outstanding letters of credit and $ 20.1 million outstanding primarily under finance leases and other debt.

We had $ 281.9 million available for use under the Credit Facility at July 31, 2022.

As of January 31, 2023, we ha d $ 100.0 million of borrowings outstanding under the Credit Facility (reduced by unamortized debt issuance costs of $1.4 million), $ 5.1 million of outstanding letters of credit and $ 55.1 million outstanding

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

primarily under finance leases and other debt.

We had $ 219.9 million available for use under the Credit Facility at January 31, 2023.

Outstanding borrowings under the Credit Facility accrue interest at 5.91 % per annum.

Our weighted average borrowing rate for borrowings outstanding during the nine months ended July 31, 2022 and 2021 was 1.81 % and 1.43 %, respectively.

We were in compliance with our debt covenants as of July 31, 2022.

Our weighted average borrowing rate for borrowings outstanding during the three months ended January 31, 2023 and 2022 was 5.43 % and 1.35 %, respectively.

We were in compliance with our debt covenants as of January 31, 2023.

Retirement Plans

Our non-contributory, single employer defined benefit pension plan covers certain of our employees in the U.S.

The net periodic pension cost for this plan for the three and nine months ended July 31, 2022 and 2021 was as follows (in thousands):

Three Months Ended Nine Months Ended

July 31, July 31,

2022 2021 2022 2021

The net periodic pension cost for this plan for the three months ended January 31, 2023 and 2022 was as follows (in thousands):

Three Months Ended

Service cost $ 96 $ 216

3 unchanged sentences

Net periodic pension benefit $ 130 $ ( 79 )

During September 2021, we contributed $ 0.5 million to fund our plan.

During the three months ended January 31, 2022 , we made no contributions to fund our plan.

During fiscal 2023 , we do not expect to need to make a contribution to the pension plan to maintain targeted funding levels and meet minimum contribution requirements.

During the year ended October 31, 2022, we notified participants that our pension plan will be terminated effective November 1, 2022, with final settlement expected to occur in the next twelve months, depending upon the timing of I.R.S.

During the three months ended January 31, 2023, we reclassified the pension obligation of $ 3.9 million from long-term liabilities under the caption “Deferred Pension Benefits” to current liabilities under the caption “Accrued Liabilities” in the accompanying condensed consolidated balance sheets.

We also have a supplemental benefit plan covering certain executive officers and key employees and a non-qualified deferred compensation plan covering members of the Board of Directors and certain key employees.

As of July 31, 2022 and October 31, 2021, our liability under the supplemental benefit plan was approxim ately $ 2.9 million.

As of July 31, 2022 and October 31, 2021, the liability associated with the deferred compensation plan was approximately $ 3.5 million and $ 3.4 million, respectively.

As of January 31, 2023 and October 31, 2022, our liability under the supplemental benefit plan was approximately $ 1.9 million.

As of January 31, 2023 and October 31, 2022, the liability associated with the deferred compensation plan was approximately $ 3.7 million and $ 3.3 million, respectively.

We record the current portion of liabilities associated with these plans under the caption “Accrued Liabilities,” and the long-term portion under the caption “Other Liabilities” in the accompanying condensed consolidated balance sheets.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

To determine our income tax expense or benefit for interim periods, consistent with accounting standards, we apply the estimated annual effective income tax rate t o year-to-date results, plus any applicable discrete items, which are recorded in the period in which they occur.

Discrete items include, among others, such events as changes in estimates due to the finalization of tax returns, tax audit settlements, expiration of statutes of limitations, tax benefits on equity compensation, and increase or decrease in valuation allowances on deferred tax assets.

Our effective tax rates from continuing operations for the nine months ended July 31, 2022 and 2021 were 22.2 % and 32.5 %, respectively.

Our effective tax rates from continuing operations for the three months ended January 31, 2023 and 2022 were 19.18 % and 17.70 %, respectively.

The difference between our effective income tax rate and the U.S.

2 unchanged sentences

tax rate differential and other permanent differences.

The primary discrete items affecting the 2022 effective rate were a benefit of $ 0.2 million related to the vesting or exercise of equity-based compensation awards and a benefit of $ 1.0 million for the true-up of our accruals and related deferred taxes from prior year.

The primary discrete items affecting the 2021 effective rate were the $ 3.1 million remeasurement of our deferred income tax assets and liabilities related to the increase in the corporate tax rate in the U.K.

from 19 % to 25 %, a charge of $ 0.6 million related to the vesting or exercise of equity-based compensation awards and a benefit of $ 0.6 million for the true-up of our accruals and related deferred taxes from prior year filings.

As of July 31, 2022, our liability for uncertain tax positions (UTP) of $ 1.4 million relates to certain U.S.

The primary discrete items affecting the 2023 effective rate was a benefit of $ 0.2 million related to the non-U.S.

tax rate differential.

The primary discrete items affecting the 2022 effective rate were the charge of $ 0.5 million related to the vesting or exercise of equity-based compensation awards and a benefit of $ 0.3 million for the true-up of our accruals and related deferred taxes from prior year filings.

As of January 31, 2023, our liability for uncertain tax positions (UTP) of $ 1.4 million relates to certain U.S.

federal and state tax items regarding the interpretation of tax laws and regulations, including a minimal amount of interest and penalties.

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To the extent interest and penalties are not assessed with respect to uncertain tax positions or the uncertainty of deductions in the future, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision.

Our total unrecognized tax benefits, if recognized, would not materially affect our effective tax rate.

We do not believe that the recorded amount of unrecognized tax benefits will decrease significantly within the next twelve months.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

We evaluate the likelihood of realization of our deferred tax assets by considering both positive and negative evidence.

We maintain a valuation allowance for certain state net operating losses which totaled $ 1.3 million as of July 31, 2022 and October 31, 2021.

We maintain a valuation allowance for certain state net operating losses which totaled $ 0.5 million as of January 31, 2023 and October 31, 2022.

On August 16, 2022 the Inflation Reduction Act of 2022 was signed into law.

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However, there is no assurance that we will prevail in these matters or that our insurers will accept full coverage of these matters, and we could, in the future, incur judgments, enter into settlements of claims, or revise our expectations regarding the outcome or insurability of matters we face, which could materially impact our results of operations.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

We have been and are currently party to multiple claims, some of which are in litigation, relating to alleged defects in a commercial sealant product that was manufactured and sold during the 2000’s.

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quoted prices for identical or similar assets or liabilities in markets that are not active;

inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates) and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

inputs other than quoted prices that are observable for the

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

asset or liability (e.g., interest rates) and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

• Level 3 - Inputs that are both significant to the fair value measurement and unobservable.

As of July 31, 2022, foreign currency derivatives were being measured on a recurring basis.

Less than $ 0.1 million of foreign currency derivatives were included in total liabilities as of July 31, 2022.

There were no outstanding foreign currency derivatives as of October 31, 2021.

All of our derivative contracts are valued using quoted market prices from brokers or exchanges and are classified within Level 2 of the fair value hierarchy.

Carrying amounts reported on the balance sheet for cash, cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturity of these instruments.

Our outstanding debt is variable rate debt that re-prices frequently, thereby limiting our exposure to significant change in interest rate risk.

As a result, the fair value of our debt instrument approximates carrying value at July 31, 2022, and October 31, 2021 (Level 2 measurement).

As a result, the fair value of our debt instrument approximates carrying value at January 31, 2023, and October 31, 2022 (Level 2 measurement).

Our performance share awards are marked-to-market on a quarterly basis during a three-year vesting period based on market data (Level 2 measurement).

For further information, refer to Note 9, “Stock-Based Compensation - Performance Share Awards.”

For further information, refer to Note 2, “Acquisition.”

Stock-Based Compensation

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We grant restricted stock units to non-employee directors on the first business day of each fiscal year.

As approved by the Compensation & Management Development Committee of our Board of Directors annually, we grant a mix of restricted stock awards, restricted stock units, performance shares and/or performance restricted stock units to officers, management and key employees.

As approved by the Compensation & Management Development Committee of our Board of Directors annually, we grant a mix of restricted stock awards, performance shares and performance restricted stock units to officers, management and key employees.

We also historically granted stock options to certain officers, directors and key employees.

Occasionally, we may make additional grants to key employees at other times during the year.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Restricted Stock Awards

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Shares are generally issued from treasury stock at the time of grant.

A summary of non-vested restricted stock awards activity during the nine months ended July 31, 2022 is presented below:

A summary of non-vested restricted stock awards activity during the three months ended January 31, 2023 is presented below:

Restricted Stock Awards Weighted Average

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Vested ( 47,000 ) 19.40

Non-vested at July 31, 2022 212,100 $ 20.86

The total weighted average grant-date fair value of restricted stock awards that vested during each of the nine months ended July 31, 2022 and 2021 was $ 1.2 million and $ 0.9 million, respectively.

As of July 31, 2022, total unrecognized compensation cost related to unamortized restricted stock awards was $ 2.3 million.

Non-vested at January 31, 2023 259,800 $ 22.08

The total weighted average grant-date fair value of restricted stock awards that vested during each of the three months ended January 31, 2023 and 2022 was $ 0.9 million and $ 1.1 million, respecti vely.

As of January 31, 2023, total unrecognized compensation cost related to unamortized restricted stock awards was $ 3.7 million.

We expect to recognize this expense over the remaining weighted average vesting period of 2.3 years.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Stock Options

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The fair value of the stock options was determined on the grant date and expensed over the vesting period resulting in an increase in additional paid-in-capital.

For employees who were nearing retirement-eligibility, we recognized stock option expense ratably over the shorter of the vesting period or the period from the grant-date to the retirement-eligibility date.

For employees who were nearing retirement-eligibility, we recognize stock option expense ratably over the shorter of the vesting period or the period from the grant-date to the retirement-eligibility date.

We use a Black-Scholes pricing model to estimate the fair value of stock options.

A description of the methodology for the valuation assumptions was disclosed in our Annual Report on Form 10-K for the fiscal year ended October 31, 2022.

The following table summarizes our stock option activity for the nine months ended July 31, 2022:

The following table summarizes our stock option activity for the three months ended January 31, 2023:

Stock Options Weighted Average

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Forfeited/Expired ( 4,000 ) 21.11

Outstanding at July 31, 2022 190,993 $ 19.37 3.0 $ 1,000

Vested at July 31, 2022 190,993 $ 19.37 3.0 $ 1,000

Exercisable at July 31, 2022 190,993 $ 19.37 3.0 $ 1,000

Outstanding at January 31, 2023 166,117 $ 19.34 2.8 $ 1,088

Vested at January 31, 2023 166,117 $ 19.34 2.8 $ 1,088

Exercisable at January 31, 2023 166,117 $ 19.34 2.8 $ 1,088

Intrinsic value is the amount by which the market price of the common stock on the date of exercise exceeds the exercise price of the stock option.

The total intrinsic value of stock options exercised during the nine months ended July 31, 2022 and 2021 was $ 0.1 million and $ 4.2 million, respectively.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The total intrinsic value of stock options exercised during the three months ended January 31, 2023 and 2022 was less than $ 0.1 million.

Restricted Stock Units

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Accordingly, we record a liability for the restricted stock units on our balance sheet and recognize any changes in the market value during each reporting period as compensation expense.

During the nine months ended July 31, 2022 and 2021, non-employee directors received 36,669 and 28,826 restricted stock units, respectively, at a weighted average grant date fair value of $ 22.52 per share and $ 18.79 per share, respectively, which vested immediately.

As of July 31, 2022, there were 21,774 non-vested restricted stock units, which were awarded in January 2020 to key employees at a weighted average grant date fair value of $ 17.08 .

During the nine months ended July 31, 2022 we paid $ 1.0 million and $ 0.8 million for the comparable prior year to settle vested restricted stock units.

During the three months ended January 31, 2023 and 2022, non-employee directors received 38,704 and 33,579 restricted stock units, respectively, at a weighted average grant date fair value of $ 20.67 per share and $ 22.54 per share, respectively, which vested immediately.

During the three months ended January 31, 2023, 21,774 restricted stock units, which were awarded to key employees, have vested.

D uring the three months ended January 31, 2023 we paid $ 0.4 million and $ 0.1 million for the comparable prior year to settle vested restricted stock units.

Performance Share Awards

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Depending on the achievement of the performance conditions, 0 % to 200 % of the awarded performance shares may ultimately vest.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes our performance share grants and the grant date fair value for the RONA performance metrics:

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The number of shares earned is variable depending on the metric achieved, and the settlement method is 100 % in our common stock, with accrued dividends paid in cash at the time of vesting, assuming the shares had been outstanding throughout the performance period.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

To value the performance restricted stock units, we used a Monte Carlo simulation model to arrive at a grant-date fair value.

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December 7, 2022 51,500 $ 23.22 —

During the nine months ended July 31, 2022 , 87,919 performance restricted stock units vested.

During the three months ended January 31, 2023 , 32,680 performance restricted stock units vested.

The performance restricted stock units are not considered outstanding shares, do not have voting rights, and are exclud ed from diluted weighted-average shares used to calculate earnings per share until the performance criteria is probable to result in the issuance of contingent shares.

As of July 31, 2022, we have de emed 41,269 shares related to the December 2019 grant of performance restricted stock units as probable to vest.

The following table summarizes amounts expensed as selling, general and administrative expense related to restricted stock awards, stock options, restricted stock units, performance share awards and performance restricted stock units for the three and nine months ended July 31, 2022 and 2021 (in thousands):

Three Months Ended Nine Months Ended

July 31, 2022 July 31, 2022

2022 2021 2022 2021

As of January 31, 2023, we have de emed 42,962 shares related to the December 2020 grant of performance restricted stock units as probable to vest.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes amounts expensed as selling, general and administrative expense related to restricted stock awards, stock options, restricted stock units, performance share awards and performance restricted stock units for the three months ended January 31, 2023 and 2022 (in thousands):

Three Months Ended

January 31, 2023

Restricted stock awards $ 438 $ 348

Stock options — — — —

Restricted stock units 1,491 994

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A deficiency of such proceeds relative to costs would be applied to reduce paid-in-capital associated with prior issuances to the extent available, with the remainder recorded as a charge to retained earnings.

There were no charges to retained earnings during the nine months ended July 31, 2022.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes the treasury stock activity during the nine months ended July 31, 2022:

Nine Months Ended

July 31, 2022

There were no charges to retained earnings during the three months ended January 31, 2023.

The following table summarizes the treasury stock activity during the three months ended January 31, 2023:

Three Months Ended

January 31, 2023

Beginning Balance as of November 1, 2022 4,081,806

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Stock options exercised ( 5,000 )

Treasury stock repurchases 291,000

Balance at July 31, 2022 4,091,695

Other, net on the condensed consolidated statements of income consisted of the following for the three and nine months ended July 31, 2022 and 2021 (in thousands):

Three Months Ended Nine Months Ended

July 31, July 31,

2022 2021 2022 2021

Balance at January 31, 2023 3,949,426

Other, net on the condensed consolidated statements of income consisted of the following for the three months ended January 31, 2023 and 2022 (in thousands):

Three Months Ended

Foreign currency transaction gains (losses) $ 42 $ ( 41 )

Foreign currency derivative gains 2 — 7 —

Foreign currency derivative losses ( 15 ) —

Pension service benefit 34 295

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Other, net $ 218 $ 54

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Segment Information

We present three reportable business segments (1) NA Fenestration, comprising three operating segments primarily focused on the fenestration market in North America including vinyl profiles, insulating glass spacers, screens & other fenestration components;

We present three reportable business segments (1) NA Fenestration, comprising four operating segments in 2023 (compared to three operating segments in 2022) primarily focused on the fenestration market in North America including vinyl profiles, insulating glass spacers, screens, custom compound mixing, and other fenestration components;

(2) EU Fenestration, comprising our U.K.-based vinyl extrusion business, manufacturing vinyl profiles & conservatories, and the European insulating glass business manufacturing insulating glass spacers;

and (3) NA Cabinet Components, comprising our cabinet door and components operations.

We maintain an Unallocated Corporate & Other which includes transaction expenses, stock-based compensation, long-term incentive awards based on the performance of our common stock and other factors, certain severance, legal, and other costs not deemed to be allocable to all segments, depreciation of corporate assets, interest expense, other, net, income taxes and inter-segment eliminations, and executive incentive compensation and medical expense fluctuations relative to planned costs as determined during the annual planning process.

The additional NA Fenestration operating segment in 2023 is related to the Acquisition of LMI, an advanced polymer solutions provider with a focus on advanced methods for mixing rubber compounds.

For additional discussion of our Acquisition of LMI, see Note 2, “Acquisition.” Additionally, we maintain an Unallocated Corporate & Other which includes transaction expenses, stock-based compensation, long-term incentive awards based on the performance of our common stock and other factors, certain severance, legal, and other costs not deemed to be allocable to all segments, depreciation of corporate assets, interest expense, other, net, income taxes and inter-segment eliminations, and executive incentive compensation and medical expense fluctuations relative to planned costs as determined during the annual planning process.

Other general and administrative costs associated with the corporate office are allocated to the reportable segments, based upon a relative measure of profitability in order to more accurately reflect each reportable business segment's administrative costs.

We allocate corporate expenses to businesses acquired mid-year from the date of acquisition.

The accounting polic ies of our operating segments are the same as those used to prepare the accompanying condensed consolidated financial statements.

Corporate general and administrative expense allocated during the three and nine month period ended July 31, 2022 was $ 5.8 million and $ 17.1 million, respectively, and $ 4.9 million and $ 15.6 million for the comparable prior year periods.

The accounting p olicies of our operating segments are the same as those used to prepare the accompanying condensed consolidated financial statements.

Corporate general and administrative expense allocated during the three month period ended January 31, 2023 was $ 4.3 million and $ 5.8 million for the comparable prior year period.

ASC Topic 280-10-50, “Segment Reporting” (ASC 280) permits aggregation of operating segments based on factors including, but not limited to:

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and (6) converging long-term economic similarities.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Segment information for the three and nine months ended July 31, 2022 and 2021, and total assets as of July 31, 2022 and October 31, 2021 are summarized in the following table (in thousands):

Segment information for the three months ended January 31, 2023 and 2022, and total assets as of January 31, 2023 and October 31, 2022 are summarized in the following table (in thousands):

NA Fenestration EU Fenestration NA Cabinet Comp.

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& Other Total

Three Months Ended July 31, 2022

Net sales $ 184,744 $ 67,613 $ 72,480 $ ( 800 ) $ 324,037

Depreciation and amortization 4,044 2,327 3,273 90 9,734

Operating income (loss) 23,086 9,818 2,329 ( 1,198 ) 34,035

Capital expenditures 4,166 621 916 — 5,703

Three Months Ended July 31, 2021

Net sales $ 147,818 $ 71,114 $ 61,936 $ ( 991 ) $ 279,877

Depreciation and amortization 4,571 2,646 3,390 76 10,683

Operating income (loss) 13,302 11,464 ( 918 ) ( 2,286 ) 21,562

Capital expenditures 2,651 2,285 1,115 156 6,207

Nine Months Ended July 31, 2022

Three Months Ended January 31, 2023

Net sales $ 152,980 $ 54,952 $ 54,674 $ ( 690 ) $ 261,916

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Capital expenditures 3,613 1,956 1,860 153 7,582

Nine Months Ended July 31, 2021

Three Months Ended January 31, 2022

Net sales $ 146,631 $ 58,914 $ 62,353 $ ( 858 ) $ 267,040

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Capital expenditures 5,305 954 1,073 38 7,370

As of July 31, 2022

As of January 31, 2023

Total assets $ 387,975 $ 235,510 $ 168,823 $ 34,718 $ 827,026

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Total assets $ 279,139 $ 223,729 $ 176,154 $ 45,595 $ 724,617

The following table summarizes the change in the carrying amount of goodwill by reportable business segment for the nine months ended July 31, 2022 (in thousands):

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes the change in the carrying amount of goodwill by reportable business segment for the three months ended January 31, 2023 (in thousands):

NA Fenestration EU Fenestration NA Cabinet Comp.

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Balance as of October 31, 2022 $ 38,712 $ 59,996 $ 39,147 $ — $ 137,855

LMI acquisition 42,091 — — — 42,091

Foreign currency translation adjustment — 4,760 — — 4,760

Balance as of July 31, 2022 $ 38,712 $ 63,390 $ 39,147 $ — $ 141,249

Balance as of January 31, 2023 $ 80,803 $ 64,756 $ 39,147 $ — $ 184,706

For further details of Goodwill, see Note 4, “Goodwill & Intangible Assets,” located herewith.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

We did not allocate non-operating loss or income tax benefit to the reportable segments.

The following table reconciles operating income as reported above to net income for the three and nine months ended July 31, 2022 and 2021 (in thousands):

Three Months Ended Nine Months Ended

July 31, July 31,

2022 2021 2022 2021

The following table reconciles operating income as reported above to net income for the three months ended January 31, 2023 and 2022 (in thousands):

Three Months Ended

Operating income $ 4,403 $ 14,126

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GAAP and contingent shares associated with performance share awards, if dilutive.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Basic and diluted earnings per share for the three and nine months ended July 31, 2022 and 2021 were calculated as follows (in thousands, except per share data):

Basic and diluted earnings per share for the three months ended January 31, 2023 and 2022 were calculated as follows (in thousands, except per share data):

Net Income Weighted Average Shares Per Share

Three Months Ended July 31, 2022

Basic earnings per common share $ 25,908 32,999 $ 0.79

Effect of dilutive securities:

Stock options — 34 —

Restricted stock awards — 99 —

Performance restricted stock units — 41 —

Diluted earnings per common share $ 25,908 33,173 $ 0.78

Three Months Ended July 31, 2021

Basic earnings per common share $ 13,679 33,359 $ 0.41

Effect of dilutive securities:

Stock options — 59 —

Restricted stock awards — 140 —

Performance restricted stock units — 92 —

Diluted earnings per common share $ 13,679 33,650 $ 0.41

Nine Months Ended July 31, 2022

Three Months Ended January 31, 2023

Basic earnings per common share $ 1,909 32,951 $ 0.06

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Diluted earnings per common share $ 1,909 33,137 $ 0.06

Nine Months Ended July 31, 2021

Three Months Ended January 31, 2022

Basic earnings per common share $ 11,239 33,124 $ 0.34

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Diluted earnings per common share $ 11,239 33,298 $ 0.34

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

We do not include equity instruments in our calculation of diluted earnings per share if those instruments would be anti-dilutive.

Such dilution is dependent on the excess of the market price of our stock over the exercise price and other components of the treasury stock method.

There were no anti-dilutive instruments for the three and nine months ended July 31, 2022 and 2021.

There were no anti-dilutive instruments for the three months ended January 31, 2023 and 2022.

New Accounting Guidance

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standards setting bodies that we adopt as of the specified effective date.

We did not adopt any new accounting pronouncements during the three and nine months ended July 31, 2022.

As of July 31, 2022, we believe the impact of any recently issued standards that are not yet effective are either not applicable to us at this time or will not have a material impact on our condensed consolidated financial statements upon adoption.

We did not adopt any new accounting pronouncements during the three months ended January 31, 2023.

As of January 31, 2023, we believe the impact of any recently issued standards that are not yet effective are either not applicable to us at this time or will not have a material impact on our condensed consolidated financial statements upon adoption.

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• changes in domestic and international economic conditions;

• changes in availability and prices of raw material including inflationary pressures and supply chain challenges, which could be exacerbated by political or global unrest such as the current situation in Ukraine;

• our ability to attract and retain skilled labor;

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements